Cost vs. Income Activities


I like to divide activities within a company into two opposing sides – cost & income. Mind you, these activities work together to create value for the end customer. So they aren’t really “opposing”. At least they shouldn’t be.

An example of an income activity is sales. Or the work of business consultants. Activities which don’t impact income directly, on the other hand, are those tackled by back office staff – e.g. accounting or tech / IT support.

“Income activities” can be easily priced. Especially those sales-related. And I’m not talking about calculating workload here (as in Project Management). I’m talking about the direct impact a specific activity has on your money. Sales is probably the best example. Oversimplifying, the more a salesman sells, the more money your company gets.

“Costs’ activities” don’t generate income directly. Those are usually support tasks. As business owners, we’d usually be happy to keep their costs low, and monitor them (it’s difficult to create self-improving mechanisms here).

Here’s the point… I know companies which have hardly more then a sales department. The rest is outsourced (though nobody calls it that way). On the other hand, I don’t remember companies which have oursourced sales or activities related to their core businesses and thrive doing support. Supporting themselves, that is.

In corporations, there don’t seem to be many attempts to outsource “the costs’ side”. If anything, customer support is thrown away to some external call center (which I find quite insane, BTW). What’s even worse, I recall examples where support activities are allowed to govern the whole business. And that’s a sad sight to see…